Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 4 years, a par value of $1,000, and a yield to maturity of 7.50%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.326% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon interest rate of 8.80% paid annually. If Mark invests in the Crabbe Waste Disposal bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) If Mark invests in the Malfoy Enterprises bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) Why are the two values calculated in part d different? Mark would be better off investing in which one?
Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 4 years, a par value of $1,000, and a yield to maturity of 7.50%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.326% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon interest rate of 8.80% paid annually. If Mark invests in the Crabbe Waste Disposal bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) If Mark invests in the Malfoy Enterprises bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) Why are the two values calculated in part d different? Mark would be better off investing in which one?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 4 years, a par value of $1,000, and a yield to maturity of 7.50%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.326% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon interest rate of 8.80% paid annually.
If Mark invests in the Crabbe Waste Disposal bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.)
If Mark invests in the Malfoy Enterprises bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.)
- Why are the two values calculated in part d different?
- Mark would be better off investing in which one?
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